I learned something new last week: I always thought CEOs understood what a CFO's role was. Well, not all of them do. For example, a couple months ago I contacted the founder of a new company in my area. I have great personal interest in what the company does, and I thought it would be a chance to do something fun. The local newspaper wrote a feature article about them and they were really starting to generate national attention. My first meeting with the founder and sales manager went very well and they expressed interest in my taking on the role of CFO.
I called their attorney to get some background and a copy of their business plan. While the business plan showed where the company wanted to go, it did not explain how they would get there. Financial projections were very elementary, and missing most of the supporting detail. Their time-line for revenue ramp-up was unrealistic, especially considering the many hurtles remaining in product development. While they admitted the plan needed to be re-written, they were totally focused on product development so they had stopped working on it. Call a spade a spade; A business plan generated after the fact, to fit the facts, is a report, not a plan. This reminded me of a meeting I had with China Unicom in Hong Kong in the mid-1990's. They were new to the telecom business and were demanding that suppliers finance the build-out of wireless systems. I asked them if they had a plan. "Yes! We are going to install systems in 88 cities by the end of the year." That is a goal, not a plan.
I asked this new company some probing questions about their choice of technologies, the target market and plans to raise capital. I must have hit a nerve. Their answer was, "We don't need people that question our vision; we need people to execute our vision." Frankly, I was disappointed. Every CFO needs to challenge executive assumptions, the team's decisions and strategies, in order to effectively present them to potential investors. Certainly a knowledgeable investor would ask similar questions. While focusing on development is critical, it's not the only thing. Attracting investors is a major responsibility of the entire executive team, and in particular the CEO. To help CEO credibility, a CFO needs to be well-informed and to remain objective. CFOs are best equipped to present your case to investors on behalf of the executive team, just like lawyers are best equipped to present your case in a court of law.
The investment pie has shrunk and will no doubt shrink even more. Times are tough. Conservative investors play their cards close to their vest. To win the game, you cannot falter, not once. During the boom of the late 1990s, business plans were done in pencil on post-it notes. No more. . . Getting investors to take the bait - big investors who can get the job done, not mom and pop speculators - means having a bullet-proof business plan with the full credibility of an experienced CFO behind it.
A few months ago, I had a series of meetings with a small, private investment firm. They stopped investing in start-ups because of the high rate of failure and the time it took to get a reasonable return on their investment. Today, these firms focus on more mature businesses that run profitably. They don't necessarily have to be high tech, bio tech or the like. They want to invest in good companies, coach them to increase in value and achieve an outstanding rate of return. So a business that has good financial controls, a plan, and working operational processes is better than one that is in disarray, one that will need a lot of attention.
Recent events on Wall Street are shocking, to say the least. Investors are running for the side-lines and holding their cash tight .if they still have any. The disaster of the mortgage industry has been brewing for years and few people thought the government would have to implement a bail-out this huge. The dire situation is compounded by a rapid rise in the price of oil that has finally awakened everyone to the fact that we can no longer postpone the adoption of energy conservation and more fuel efficient vehicles. Automobile companies, long the back-bone of the U.S. economy, must reinvent themselves in a very short time period, while tolerating lower sales in the meantime. This will ripple across other industries in a matter of months, perhaps not as dramatic as the mortgage industry, but not too far behind. Where does this leave your company? If you want to attract even a dribble from the shrinking pool of capital funds, it makes it all the more important to have each and every one of your ducks in a row: Technology, management, systems, sales & marketing, customer support. None can be ignored and all need to operate like a well-oiled machine. There are too many companies needing cash, and far too little cash to go around. You'll need to fight for every nickel.
Ultimately the shake out will leave only executive teams who can plan, execute and stay on track at all times - no surprise there. Good ideas are important, but coherent leadership under an executive team in sync with each other is great. Investors detect this. Companies like Thomas Financial Services, www.thomasfinancialsvcs.com apply insight and experience to get you back on the ladder to success. It's not enough to manage an opportunity. You need to manage the whole business through constant attention to financial systems, ERP, the supply chain, customer experience management, production, and all the nuts and bolts that give investors confidence.
Little companies can succeed. Big companies fail every day. Failure to anticipate and plan kills your future. Recent blowups like Lehman and AIG drive home the point that when even the big boys take their eye off the ball, they strike out too. Chief Financial Officers turn organizational discipline into credibility with investors. Make sure your executive team is truly a team. Stay on top of your game. Plan your work, work your plan. - 15359
I called their attorney to get some background and a copy of their business plan. While the business plan showed where the company wanted to go, it did not explain how they would get there. Financial projections were very elementary, and missing most of the supporting detail. Their time-line for revenue ramp-up was unrealistic, especially considering the many hurtles remaining in product development. While they admitted the plan needed to be re-written, they were totally focused on product development so they had stopped working on it. Call a spade a spade; A business plan generated after the fact, to fit the facts, is a report, not a plan. This reminded me of a meeting I had with China Unicom in Hong Kong in the mid-1990's. They were new to the telecom business and were demanding that suppliers finance the build-out of wireless systems. I asked them if they had a plan. "Yes! We are going to install systems in 88 cities by the end of the year." That is a goal, not a plan.
I asked this new company some probing questions about their choice of technologies, the target market and plans to raise capital. I must have hit a nerve. Their answer was, "We don't need people that question our vision; we need people to execute our vision." Frankly, I was disappointed. Every CFO needs to challenge executive assumptions, the team's decisions and strategies, in order to effectively present them to potential investors. Certainly a knowledgeable investor would ask similar questions. While focusing on development is critical, it's not the only thing. Attracting investors is a major responsibility of the entire executive team, and in particular the CEO. To help CEO credibility, a CFO needs to be well-informed and to remain objective. CFOs are best equipped to present your case to investors on behalf of the executive team, just like lawyers are best equipped to present your case in a court of law.
The investment pie has shrunk and will no doubt shrink even more. Times are tough. Conservative investors play their cards close to their vest. To win the game, you cannot falter, not once. During the boom of the late 1990s, business plans were done in pencil on post-it notes. No more. . . Getting investors to take the bait - big investors who can get the job done, not mom and pop speculators - means having a bullet-proof business plan with the full credibility of an experienced CFO behind it.
A few months ago, I had a series of meetings with a small, private investment firm. They stopped investing in start-ups because of the high rate of failure and the time it took to get a reasonable return on their investment. Today, these firms focus on more mature businesses that run profitably. They don't necessarily have to be high tech, bio tech or the like. They want to invest in good companies, coach them to increase in value and achieve an outstanding rate of return. So a business that has good financial controls, a plan, and working operational processes is better than one that is in disarray, one that will need a lot of attention.
Recent events on Wall Street are shocking, to say the least. Investors are running for the side-lines and holding their cash tight .if they still have any. The disaster of the mortgage industry has been brewing for years and few people thought the government would have to implement a bail-out this huge. The dire situation is compounded by a rapid rise in the price of oil that has finally awakened everyone to the fact that we can no longer postpone the adoption of energy conservation and more fuel efficient vehicles. Automobile companies, long the back-bone of the U.S. economy, must reinvent themselves in a very short time period, while tolerating lower sales in the meantime. This will ripple across other industries in a matter of months, perhaps not as dramatic as the mortgage industry, but not too far behind. Where does this leave your company? If you want to attract even a dribble from the shrinking pool of capital funds, it makes it all the more important to have each and every one of your ducks in a row: Technology, management, systems, sales & marketing, customer support. None can be ignored and all need to operate like a well-oiled machine. There are too many companies needing cash, and far too little cash to go around. You'll need to fight for every nickel.
Ultimately the shake out will leave only executive teams who can plan, execute and stay on track at all times - no surprise there. Good ideas are important, but coherent leadership under an executive team in sync with each other is great. Investors detect this. Companies like Thomas Financial Services, www.thomasfinancialsvcs.com apply insight and experience to get you back on the ladder to success. It's not enough to manage an opportunity. You need to manage the whole business through constant attention to financial systems, ERP, the supply chain, customer experience management, production, and all the nuts and bolts that give investors confidence.
Little companies can succeed. Big companies fail every day. Failure to anticipate and plan kills your future. Recent blowups like Lehman and AIG drive home the point that when even the big boys take their eye off the ball, they strike out too. Chief Financial Officers turn organizational discipline into credibility with investors. Make sure your executive team is truly a team. Stay on top of your game. Plan your work, work your plan. - 15359
About the Author:
A credible start-up looking for funding and people with money often find it difficult to connect Small Business Consulting through Thomas Financial Services LLC helps tune your company up, make the connection. CEO Thomas Mezger, tmezger@thomasfinancialsvcs.com and SVP John Sawinski, jsawinski@thomasfinancialsvcs.com bring compact, broad-ranging experience getting companies to the next level. Get in touch with us today
